Introduction

This Write-Up considers the recent decision of the Federal Court, in the case of Lai King Lung & Anor v Merais Sdn Bhd [2020] 9 CLJ 449 (“Lai King Lung”) the Judgment delivered by Vernon Ong FCJ on 20th July 2020 where the Federal Court addressed the following Questions of Law:-

Question 1

Whether retrospective sanction from the Official Receiver/Liquidator of a wound- up Appellant/Applicant in Court by itself can sufficiently clothe the Appellant and/or their solicitors with locus standi to proceed with the Appeal/proceeding in question without leave nunc pro tunc obtained from the Court?

Question 2

If the answer to Question 1 is NO, whether the application for leave nunc pro tunc to the Court must be made by way of a formal application pursuant to Section 486(2) of the Companies Act 2016?

Brief Facts

1. The Plaintiff (Respondent in the Federal Court) a private limited company commenced legal proceedings against the Defendant (Applicant in the Federal Court) in the year 2013.
2. The Defendant in turn filed a Counter-Claim against the Plaintiff.
3. While the legal proceedings were on going, the Plaintiff was wound up on 1st September 2015 and the Official Receiver was appointed as the Liquidator.
4. On 18th January 2016, the Liquidator gave the sanction for the Plaintiff’s contributory to proceed with the legal proceedings in the High Court.
5. On 28th November 2017, the High Court dismissed the Plaintiff’s claim and Defendant’s claim.
6. The Contributory’s Solicitor then filed a Notice of Appeal to the Court of Appeal on 22nd December 2017.
7. On the same date, 22nd December 2017, the Contributory’s Solicitor applies for sanction from the Liquidator of the Plaintiff to proceed with the Appeal in the Court of Appeal.
8. On 2nd February 2018, the Liquidator gave its sanction which was to take effect retrospectively from 21st December 2017.
9. The Defendant filed a Motion to strike-out the Plaintiff’s appeal on two (2) grounds i.e.:
   1. That the retrospective sanction granted by the Liquidator was invalid in
   law; and
   2. That the Court of Appeal did not grant any leave nunc pro tunc.

Note: nunc pro tunc is a Latin expression, which literally means 'now and then'. The court will in certain cases, allow a proceeding to be treated as being taken on a particular date, although as a matter of fact not completed until afterwards. [Words, Phrases & Maxims (Legally & Judicially Defined) Vol. 11 Anandan Krishnan (LexisNexis)]

In the Court of Appeal

Mary Lim JCA

• The Court of Appeal dismissed the Defendant’s/Respondent’s Motion to Strike Out.
• The Court held that there are no provisions in Section 483 or Section 486 of the new Companies Act 2016 which states that actions or proceedings or appeals filed without the sanction or approval of the liquidator, are necessarily void-ab initio and must be struck out.
• The Court held that with reference to Section 236(2) of Companies Act 1965, it is the liquidator who has the authority to bring or defend any action or proceedings in Court and that ‘bringing’ must necessarily include continuing with any action or proceeding already brought or commenced.
• This will also extend to the conduct and continuation of Appeal. That the Appellant had timeously and diligently attended to the matters of mandate and sanction.
• That the Appellant had promptly informed of the registration details of the Appeal and sought the sanction of the Official Receiver retrospectively.

Leave in the Federal Court

Leave was granted to the Defendant/Applicant on the two questions as posed above.

Decision of the Federal Court

Question 1 answered in the negative

In answering Question 1, the Court was concerned with Sections 236(2)(a) and 236(3) Companies Act 1965 (now Section 486 Companies Act 2016 read together with Part 1 of the Twelfth Schedule)

These are the relevant sections to be considered where proceedings are commenced by the wound-up company and the sanction of the liquidator is required.

Question 2 not answered as it was a non-issue.

• The Federal Court noted that there was no formal application made by the Plaintiff in the Court of Appeal and material to consider for leave nunc pro tunc.
• This was undeniable from the Appeal Records.
• There was no order from the Court of Appeal to the effect that leave to ratify the retrospective sanction was given.
• Accordingly, the issue to ratify the retrospective sanction of the liquidator did not arise.

The Federal Court allowed the Appeal of the Defendant/Applicant/Appellant with costs and set-aside the decision of the Court of Appeal.

The Court held that the Notice of Appeal filed by the Plaintiff was bad in law and of no legal effect.

Accordingly, the Defendant/Applicant/Appellant’s Motion to Strike Out the Appeal was allowed.

Conclusion

What can be crystalized from this decision is the fact that in law there can be no retrospective sanction granted by the Liquidator of a Wound-Up company to commence a suit. The sanction of the liquidator must be applied timeously before the event, whether to commence legal proceedings in the High Court or to appeal to a higher Court. At each level, the sanction must first be obtained to give the said Wound-Up company its necessary locus standi to proceed with the legal action.

It will be an afterthought and an exercise in futility to apply for the liquidator’s sanction subsequent to having proceeded with the necessary legal action or recourse and the Court will not be merciful to the Applicant.

Another principle of law to be distilled from this decision is the fact that it is only the Court that can ratify the retrospective sanction of the liquidator, For this, there must be a formal application for leave nunc pro tunc supported by cogent reasons and materials in the Affidavit to enable the Court to exercise its discretion judiciously whether to regularise the sanction by giving it retrospective effect.

The Court will not lend aid to an applicant where there is no such application for consideration. In such an instance, the Applicant will be faced with a rejection by the Court to its own detriment and peril.

The Federal Court noted the sentiments as expressed by the Court of Appeal in it’s Judgment in Merais Sdn Bhd v Lai King Lung & Another [2020] 9 CLJ 449 which had categorically stated that "had there been an application for retrospective leave or leave nunc pro tunc sought by the appellant before us, we would have granted it unhesitatingly. The reasons and explanations offered are matters of record and are strong cogent reasons for the grant of such leave”.

What is abundantly clear is the fact that, the decision of the Federal Court in Lai King Lung echoed an earlier decision of the Federal Court in the case of Winstech Engineering Sdn Bhd V ESPL (M) Sdn Bhd [2014] 2 CLJ 1 (“Winstech”). In Winstech, there was no application for leave nunc pro tunc to ratify the retrospective sanction of the liquidator, and this issue did not arise.

The Court in Winstech held that in the absence of a leave nunc pro tunc application, there is no issue of prejudice or miscarriage of justice in such a circumstance. The Court further held that the Court in law, is not in a position to render assistance to such a litigant.